Malaysia’s robust macroeconomic conditions supportive to banks

Is the property market still getting the right support from the banks? Well, it’s vice-versa too because the question can also be if the property market is still supporting the banks’ bottomline. A huge percentage of banks’ profits come from property loans. If everyone stops buying, then the profit stops too. 🙂 Personally, I hope the bank do not simply support every potential property buyer though. Earlier article here: Lending to everyone is not helping the borrower, actuallyAnyway, my views are irrelevant. Let’s listen to Moody’s Investors Service’s views about Malaysia’s banking system outlook. Full article in nst.com.my here. It said that Malaysian banks are seen to to be stable (A3 stable) over the next 12-18 months. This view is supported by robust macroeconomic conditions within and outside the country. Moody’s Vice President and Senior Analyst, Simon Chen shared that having such an environment is favourable to Malaysian banks. At the same time, this helps to stabilise asset quality and profitability.

Moody’s conclusions were based based on its assessment of six drivers, namely operating environment (stable), asset quality (stable), capital (improving), funding and liquidity (stable), profitability and efficiency (stable) and government support (stable). It thinks policy uncertainty poses a risk but has forecast Malaysia’s real Gross Domestic Product to expand by 5.4 per cent in 2018, and loans growing 6-7 per cent in the same period. It said that corporate profitability will be improving and growth in risky household loans eases.It also said that local banks are well positioned to comfortably meet minimum requirements under Basel III liquidity and funding rules. (Briefly, Basel 111 requires banks to maintain proper leverage ratios and meet certain minimum capital requirements. Please read more details here.) There would be faster loan growth too which will continue to help in the profitability profiles of the banks too. Moody’s currently rates 11 banks in Malaysia – eight conventional commercial, one investment, one Islamic and one government-owned development financial institution.It has maintained a stable outlook on the Malaysian banking system since 2010. Full article in NST for reference here.

Regardless of what some well-known property experts say, always remember to look for an overview sign provided to all of us by the banks. When the banks’ start showing slower loans growth as well as profits which were lower than previous year, this is already a sign of a slowing down market. When the market slows down and we still pay at the higher end of the scale for the property, then it’s our fault for failing to see that the market has already slowed down for the past 1 year. Market recovery takes time too. It’s also now possible for me to say more loudly that Malaysia is not about to fall into a financial crisis too. By the way, the economy has not SUDDENLY changed within the past 1 month yeah. However, the sentiment has indeed turned positive which is a good thing. Perhaps it’s time to wait for more assessments from the other two international rating agencies; Fitch Ratings as well as Standard & Poors. Happy reading ratings.

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